CHAPTER 10. Restrictions and Prohibited Practices [1320 - 1367]

ARTICLE 2. Loans to Insiders [1360 - 1367]

It is the intent of the Legislature that the provisions of this article, insofar as they are contained in Regulation O (12 C.F.R. Part 215) of the Federal Reserve Board, conform, and be interpreted by anyone construing the provisions of this article to so conform, to Regulation O, to any rule or interpretation promulgated thereunder by the Board of Governors of the Federal Reserve System, and to any interpretation issued by an official or employee of the Federal Reserve System duly
authorized to issue the interpretation.

(1) Any commercial bank, industrial bank, or trust company incorporated under the laws of this state.

(2) Any foreign (other nation) bank that is licensed by the commissioner under Article 3 (commencing with Section 1800) of Chapter 20 to maintain a
depositary agency or branch office, as defined in Section 1750, in this state, with respect to any office of that type.

(3) Any corporation incorporated under the laws of this state that is incorporated for the purpose of engaging in, or that is authorized by the commissioner to engage in, business under Article 1 (commencing with Section 1850) of Chapter 21.

(4) Any foreign corporation that is licensed by the commissioner under Article 1 (commencing with Section 1850) of Chapter 21 to maintain an office in this state and to transact at the office business under that article, with respect to any office of that type.

(5) When used to designate a person that extends credit, any subsidiary of a bank, as defined in paragraph (1), (2), (3), or (4).

(b) “Company” has the meaning set forth in subdivision (b) of Section 215.2 of Regulation O.

(c) “Executive officer” has the meaning set forth in paragraph (1) of subdivision (e) of Section 215.2 of Regulation O. Also, “executive officer,” when used with respect to any bank of the type described in paragraph (2) or (4) of subdivision (a), includes the manager of each office of the type referred to in paragraph (2) or (4) of subdivision (a) that the bank maintains in this state.

(d) “Extension of credit” has the meaning set forth in Section 215.3 of Regulation O. However, for purposes of this subdivision, the term “member bank,” as used in Section 215.3, means a bank.

(e) “Regulation O” means Regulation O (Part 215 (commencing with Section 215.1) of Title 12 of the Code of Federal Regulations) of the
Board of Governors of the Federal Reserve System.

(f) “Subsidiary” has the meaning set forth in Section 1841(d) of Title 12 of the United States Code. However, for purposes of this subdivision, the term “bank holding company,” as used in Section 1841(d) of Title 12 of the United States Code, means a bank holding company, as defined in Section 1841(a) of Title 12 of the United States Code, or a bank, and the term “board,” as used in Section 1841(d) of Title 12 of the United States Code, means the commissioner.

Sections 215.2, 215.3, 215.4, 215.5, 215.8, and 215.9 of Regulation O in all of their particulars, including footnotes, are hereby referred to, incorporated by reference into this article, and adopted, subject to the following:

(a) The term “this Subpart,” as used in the referenced sections of Regulation O, means this article.

(b) Subdivision (j) of Section
215.2 of Regulation O is not applicable. Instead, the term “member bank,” as used in the referenced sections of Regulation O, means a bank.

(c) The term “executive officer,” as used in the referenced sections of Regulation O, includes, in the case of a bank of the type described in paragraph (2) or (4) of subdivision (a) of Section 1361, the manager of each office of the type referred to in paragraph (2) or (4) of subdivision (a) of Section 1361 that the bank maintains in this state.

(d) The definition of “lending limit” in subdivision (i) of Section 215.2 of Regulation O is not applicable; instead, the term “lending limit,” as used in the referenced sections of Regulation O, means an amount equal to the limit on obligations of a single obligor set forth in Section 1481, and any reference in the referenced sections of Regulation O to the lending limit specified in subdivision (i)
of Section 215.2 is considered to be a reference to the limit specified in Section 1481.

(e) (1) Any company which is majority owned by one or more executive officers or directors of a bank, individually or collectively, is deemed to be a related interest of each of those executive officers or directors for purposes of the referenced sections of Regulation O.

(2) In case an individual who is an executive officer of a bank is also a director or executive officer of a company, the company is deemed to be a related interest of the individual for purposes of the referenced sections of Regulation O except subdivision (c) of Section 215.4. However, this paragraph shall not apply to an extension of credit by a bank to any of the following companies:

(A) A bank holding company of which the bank is a
subsidiary.

(B) Any subsidiary of the bank holding company.

(C) Any nonprofit company engaged in religious, charitable, educational, scientific, literary, social, or recreational purposes, provided that the individual whose position as a director or executive officer of the company at issue does not receive compensation in excess of one thousand dollars ($1,000) per year for serving as a director or executive officer of the company.

(3) In case a bank in making an extension of credit becomes subject to the requirements set forth in subdivision (b)(1)(i) of Section 215.4 of Regulation O because of paragraph (1) or (2), the bank shall be deemed to fulfill the requirement if the extension of credit is promptly reported to the board of the bank.

No bank shall extend credit in an aggregate amount greater than the amount permitted in paragraph (4) of subdivision (c) of Section 215.5 of Regulation O to any company that is majority owned by one or more executive officers of the bank, individually or collectively. For purposes of paragraph (4) of subdivision (c) of Section 215.5 of Regulation O, the total amount of credit extended by the bank to the company is considered to be extended to each of those executive
officers.

A bank may make a loan, otherwise complying with the provisions of this division, for the benefit of a trust, notwithstanding that the bank or any one or more executive officers or directors of the bank are trustees of the trust.

Any bank that makes an extension of credit in violation of this article is subject to a civil penalty pursuant to Section 329. Any person, other than the bank making the extension of credit, who knowingly makes or procures an extension of credit in violation of this article is guilty of a felony.